The Zhitong Finance App learned that Goldman Sachs portfolio strategy researchers believe that if Trump wins a second term as US president, the tariffs he may levy will hurt the European economy, and the defense sector of the market will become a risk beneficiary.

The team led by Sharon Bell said in a report on Wednesday that Europe's biggest concern is tariffs, and Trump promised to impose a 10% tariff on all US imports. According to Goldman Sachs economists, this move could mean a 1% drop in Eurozone GDP and a 0.5% drop in US GDP.

Goldman Sachs researchers studied the economic and market conditions associated with Trump's re-election, as forecasters began to think that his chances of being re-elected in November were around 70%.

Bell said, “Overall, we estimate that European earnings per share will be impacted by about 6-7 percentage points. If all of the impacts occur in 2025, this will be enough to eliminate any growth that year”. Overall, Goldman Sachs currently anticipates a 4% increase in earnings per share in 2025.

The company said that in the market, defensive sectors such as utilities and healthcare, as well as interest rate sensitive sectors such as growth stocks and real estate, are often the main relative beneficiaries of rising trade risks. Cyclical stocks such as automobiles, industry, and finance are generally negatively correlated with trade uncertainty.

Potential relative beneficiaries also include high-quality European large-cap stocks known by Goldman Sachs as GRANOLAS (“granola”) for short. In March of this year, Goldman Sachs incorporated companies such as GSK.US (GSK.US), ASML.US (ASML.US), Novartis Pharmaceuticals (NVS.US), and L'Oréal (LRLCY.US) into the GRANOLAS group. Goldman Sachs said on Wednesday, “The market now favors high-quality, large-cap stocks (GRANOLAS) more significantly, and they should have been unaffected.”

The research team said that as European companies face global risks, the impact on sales-weighted GDP may be slightly less than 1 percentage point. A stronger dollar and possible US tax cuts and deregulation may all have other offsetting effects.

Bell said, “There is uncertainty about the election results and implementation of any policy. We haven't adjusted our forecasts and recommendations.” According to reports, Goldman Sachs is still reducing its holdings in automotive and chemical stocks and increasing its holdings in the medical, telecommunications, and media publishers.